I had a call last week from a woman who wondered where she could find out if certain homes for sale were approved for FHA financing. As I talked to her about the fact that, for the most part, it takes an appraiser to determine whether or not a home qualifies, I tried to explain what she would need to look for so she could avoid paying for appraisals on property that may not qualify. It occurred to me that there was a good blog post in that explanation so here it goes!
FHA appraisers do a different type of appraisal than appraisers for conventional loans. They are more concerned with the health and safety of the borrowers. They look at the standard things that all appraisers look at, and they take it a little further. FHA is not only concerned with the property value but is also concerned with things like handrails on steps, broken windows, lack of screens, evidence of rodent infestation and other issues that don’t affect a normal appraisal to the same degree. If the house was built before 1978 and may have the potential for lead based paint, the FHA appraiser looks for peeling paint. The FHA appraiser needs to see that the bedrooms have egress in case of a fire, the windows have to work and if there are burglar bars they need to have the code approved methods of opening them from the inside in case of a fire. They want to see smoke detectors. The FHA appraiser needs to see window screens if there isn’t central air conditioning. They look at the remaining life of the roof and the furnace and hot water heaters and want to see a stove in the kitchen. The utilities have to be on during the appraisal and they check that the various components are working. The appraiser looks for evidence of environmental contaminants like asbestos and mold. The FHA appraiser looks for earth to wood contact and other evidence of termites.
So for the most part, the home has to be livable. If the carpet can be cleaned or the house needs paint to make it clean and fresh, this will not generally be enough to cause the appraiser to require that the work be done before closing (or after). If you want to read the actual FHA appraisal guidelines you can see an article from HUD here. The basic HUD website can be found here and the FHA Appraisal page has an overview of the entire process.
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I have several issues going on with an GA appraisal that was ordered by the buyers mortgage company. It is about 6,000 less than the contract/selling price. The appraisal does not include a new roof, gutters, down-spouts, new granite kitchen counter tops, new granite counter tops in both bathrooms, new tile floor in master bath and tile around tub, new shower in master bath, new wood vanity in master, new slate tile in kitchen, laundry room, and recently extended walk in pantry with slate tile on floor. New/upgraded kitchen faucets, new/upgraded shower faucets, bathtub faucets and bathroom sink faucets, new undermount sinks in kitchen and new double porecelin sinks in master bath and new porecelin sink in 2nd bath, freshly painted exterior and all rooms interior, new stainless steel applainces,, all new light fixtures through out entire home and 3 new ceiling fans, has my home listed as a foreclosure and it is NOT A FORECLOSURE, has the home on a slab instead of a crawl space, has the land listed at 0.06 acre instead it should be 0.47 acre. He even has the date of his inspection WRONG. Both realtors involved and myself have asked for a review and an adjustment of the property. The only thing that he is willing to correct is the issue of the land/acre. He said this is all he thinks my home is worth in his opion, because all i’ve done is bring the house up to date. I don’t know what to do being that he has filed this appraisal with the state of GA and i am stuck with this appraisal for 90 days. Please give me some advice pretty fast, if at all possible. Thanks
Cynthia,
One thing to understand about appraisals is that the appraisers do not get to go into the houses of the comparable properties to see what the upgrades are in the comps. So they don’t give you credit for individual upgrades, they just rate your house (average, very good, excellent etc).
Unfortunately what you are doing is basically all there is to do. Did you go back to the appraiser for the review or the manager of the company that ordered the appraisal for a appeal/review? The banks go to a appraisal company that orders the appraisal from a bank of appraisers and the manager of that company is where you appeal.
I am starting to hear of some people who have had some success with appeals. I would suggest you try to find comps of homes with more of the renovations like you have which have sold for more money. They have to be similar in age and size and should have closed ideally in less that three months ago or at most 6 months ago. They also have to be close to yours (within a mile). Sometimes if you actually have better comps than the appraiser used it is easier to convince someone to adjust.
Good luck!
Dan, Thanks so much for taking the time out of your busy life to give me such good advice. I have requested a review with the appraiser and he corrected his mistakes, but says that he can’t change the price of the appraisal. I contacted the 3rd party national vendor that sent him to my home for the appraisal and that manager said that if the appraiser want correct the price of the home, then he can send out another appraiser . Can the price of the appraisal be changed if the appraiser already submitted it to The State of GA? I guesss we’ll have to see what happens. Thanks again, Cynthia
Glad I could help! Let me know how it works out. I am also in Georgia so I would be interested if you can get an adjustment.
We found a house, but it has no kitchen. it’s also not in the best condition but it’s livable. I know it cannot be appraised in its current condition. It’s not livable without the kitchen.
what can be done. Can you buy the house, and contract with the seller that we will add the kitchen, but if escrow or sale falls through for any reason, we can take what we put in, back out? It’s a short sale so we know there is nobody on the other side motivated to install a kitchen. Only thing left is cash purchase but at $500k not many cash buyers with that much loot.
You can buy it with a rehab loan. Depending on which part of the country you are in, you may be able to use the FHA 203K loan. Different areas have different loan limits for FHA. If they aren’t high enough in your area there are conventional purchase rehab loans available. You have to used contractors that are approved by the lender and go through some hoops to get the loan, but that would be one way to purchase.
I think that it would be dangerous to put a kitchen in and then try to remove it if the loan doesn’t close. For one thing the cabinets etc would not have much value after having been installed and removed. Another problem is that the installed items become fixtures and technically then belong to the owner. Just like if a tenant installs something while renting, they do not automatically have the right to remove it when they leave.
Hi my name is Tarl i just had a appraisal done on a house im trying to buy. The appraiser refused to provide me with a copy and said that the mortgage company would have to provide it and they where only obligated to do so 72 hours after closing. can you tell me the laws on this.
thanks
Well I am not sure what the laws are, (not being a lawyer) but I have never heard of someone getting the appraisal until three days after the closing, after 24 years in the business. You paid the mortgage company for the appraisal and they paid the appraiser so I understand why the lender gets it from the appraiser, but three days after closing? I never saw that.
Hi, My wife and I just had an appraisal done on a house yesterday for an FHA mortgage and I’m not sure the appraiser liked what he saw. First I’ll give you a little background. Homes in this neighborhood typically go for about 360-460k. On zillow.com the home we’re looking at is shown as about 366k. The seller is a both a longtime friend and a volunteer firefighter. He picked up and moved to another state and wants to see his house go to another fireman, so he is selling the house for 310k. I had no problems whatsoever qualifying for the FHA loan. We had the appraisal done yesterday, I think the appraiser had issues with a few things. A set of stairs probably needs railings, and there might be some very minor cosmetic issues that the FHA inspector pointed out that FHA may not like. There is nothing that the seller and I couldn’t take care in a weekend (he’s built many homes for habitat for humanity and I’m very handy… this stuff is cakewalk and inexpensive). Here’s my question: Do they basically make their decision and that’s it? Or are they at least slightly reasonable and make some demands and come back for a re-inspection?
Hey John,
I am sorry it took so long to reply. Normally I get an email when someone posts on my blog, but somehow that stopped happening!
If they have issues with the house they give you a list. You can correct the items and they will come out and reinspect. Not a big problem normally if you can do the work!
During an appraisal for FHA, is the land value considered. I am purchasing a home on 2.5 acres in CA. I was told FHA does not consider the land, is this true?
Well I start every other answer by saying “I am not an appraiser, I am a Realtor” I did take the basic appraisal course but that was over 20 years ago and I have done no continuing education. But I have been involved with many closings over the years and my opinions are based on my observations.
When an FHA appraiser values a home on 2.5 acres they normally look for comparable properties. That would be similar homes on large tracts of land. They don’t give extra weight to homes on larger parcels or take off some of the value for homes on 1.75 acres, they just find generally similar properties and compare the houses. So normally they wouldn’t compare it to a home on a 1/10 acre tract in a subdivision.
Hope that helps!
We are selling a home. The appraiser has concerns with an old unusable barn on the property.There is a hole in the foundation of the wall.The rec. someone to come and look at it to re enforcethe frame. If it can be fixed does the buyer or seller pay for this? What happens if it is un fixable?
Do we know if a buyer can use the fha 203-k streamline to mitigate mold on a Fannie Mae owned property We already have the appraisal and there is room on the value but we are hearing conflicting points. Some say no because it’s a service being provided and not a repair. We already have a bid in hand to mitigate.
Sorry I missed this question earlier! You can include mold remediation in a 203-K loan. Normally the appraiser will require that it’s dealt with before closing if it’s not included in the renovation bid.
How long does it take to get an appraisal done these days? I’m trying to purchase a home using FHA, and I’m a fully qualified buyer. But the appraisal has been ordered for 2 weeks now. My new job starts in 4 weeks, and I’m getting fed up. My realtor says it’s the new Federal Regs, but I’m getting very stressed. What can I do?
The best thing in this circumstance is to be patient. I know it’s hard, but pushing may do more harm than good. The lender can put in an inquiry to see if the order got lost in cyberspace, but that’s as far as I would go.
My son is in the process of buying a foreclosed property and has been approved through FHA. The house has to have a foundation inspection. The foundation is as follows: a concrete slab with 4 blocked walls and piers. The walls are approximately 6 foot tall, resemballing a basement. None of it is underground. We found out from our realator that the piers have to be wrapped because they are not concreted between the joints of the blocks, they are dry stacked. This is a manufactured home and is tied down. The cost to fix the piers is $3000. The bank does not want to pay for this. Do the piers have to be wrapped or is what is there adequate? This home is located in Kentucky.
Cindy,
Sorry but I do not know the answer to this!
Hi trying to buy a modified A frame home in OK. I am conserned about the apprasial because the home is unusal for this area. The real estate agent tells me that I might not be able to get an FHA loan because they can not find a property to compare it to. Any way to get around this?
Not that I know of, the only way to find out is to pay for an appraisal and see what happens. I have seen homes appraise with no obvious comps and have seen homes with lots of comps not appraise. ..no rhyme or reason!
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